More than 10 local technology start-ups in the Mena region are expected to exit in the next three to five years, said a top official of Beco Capital, a venture capital firm focused on technology investments.

A handful of them have the potential to break the one billion dollar valuation ceiling, forming the first regional “unicorns” and creating a virtuous cycle for the start-up ecosystem, said Amir Farha, co-founder and managing partner at Beco Capital.

“While many of these online ventures are experiencing strong growth and possess solid business models, a few of them will actually receive unicorn valuations, meaning raising funds at a valuation of $1 billion or more,” Farha said, who is speaking at the STEP Conference in Dubai, UAE today (March 31).

The time taken to build enterprise value in a start-up has significantly been reduced. This is driven by regional market fundamentals such as economic growth, demographics, online and smart phone penetration, which are some of the highest in the world, and an increase in venture capital, will all contribute to the creation of such regional unicorns, Farha added.

Over 1000 technology entrepreneurs, start-ups, investors and businesses are meeting at the STEP Conference in Dubai to discuss the industry’s trends. Entrepreneurs will have the opportunity to showcase their businesses to investors, for the “next-round” of fund raising for their ventures which many of them hope to grow into those $1 billion endeavours.

The exit market for start-ups continues to improve, and the future looks very promising, with momentum continuing to pick up each year. Exits before 2005 took anything between seven to 11 years to materialise, and this has dropped to between four and eight years, at similar or higher valuations.

“We will see many exits coming at relatively high valuations of over $100 million or more, but what will put the region on the world map of venture capital will be the first $1 billion exit, whether through a trade sale to strategic company or even through an IPO. We see some regional companies that have this potential, and we are thrilled to be part of their exciting future,” Farha said.

“This will ignite a virtuous cycle, generating massive value to the ecosystem, both in terms of investment and talent that will hopefully be recycled back into the ecosystem and used to create even more exciting start-ups, more jobs and more revenues for the local and regional economies,” he added.

Over 40 exits have been completed in technology start-ups in the region since the initiation of the sector, but Amir Farha said that some of them came too soon. He cautioned the regional industry of losing their next unicorns if they don’t support their winners properly and if they don’t time their exits correctly.

“Some of the unicorns-in-the-making could complete their exits to international strategic firms or VC firms sooner,” Farha explained.

“This might sound great if we do not take into account that these companies could be a bigger phenomenon than the region anticipated. They could become the unicorns we have been waiting for. So let’s not miss out on our future unicorns. We need to back our local and regional start-ups and build large leading companies that can capture the highest value.”

Farha expects that over the next 10 years, local start-ups will be targeted by the large technology companies being built in the region today, backed by regional venture capital investors such as Beco Capital.

In addition, the US and European venture capital investors are taking the MENA region more seriously and exploring potential investment opportunities, while the large technology corporations in those markets have reached saturation and are looking for growth through geographical expansion.

Finally, India is another exit channel for regional start-ups given the huge boom in venture capital that it has experienced today.

The country has produced 9 technology companies that are worth over $1 billion and 20 more in the pipeline, and these companies will eventually look to migrate outside India, with the GCC representing a relatively easy expansion avenue given the close proximity to their country and the cultural similarities that exists, Farha concluded. – TradeArabia News Service